GUIDANCE ON CORPORATE PUBLIC POLICY ADVOCACY OVERSIGHT

Businesses justify their public policy advocacy as intrinsic and essential to strategic management of their businesses, inasmuch as their business success or failure can be greatly influenced by government decisions. Top managers who recognize this dependence feel a responsibility to make known the effect of such decisions on their companies and to defend their companies’ interests against those of other companies or interest groups who are also active in the public policy advocacy arena. Executives see much of their public policy advocacy activity as essentially defensive efforts to ward off potential threats and to preserve a favorable context of public policy within which to operate their businesses.

It is a matter of good corporate governance for companies to ensure that any public policy advocacy involvement is both legitimate and transparent, and that companies and their Boards are held properly to account for their public policy advocacy activities. Corporate public policy advocacy is a common practice which seeks to inform and influence political decisions, regulation, legislation and policies according to the interests of an individual corporation, a sector or grouping of businesses, or business-at-large. Corporations that devote monetary or other resources to public policy advocacy activity typically do so to promote the interests of the company, and ultimately its investors. In some cases it could be argued that informational input is a social responsibility of business, particularly when there is important corporate knowledge about issues or technologies that can help to inform intelligent legislation and public policy.

Legitimate corporate public policy advocacy activities are those that are conducted legally and transparently, are clearly linked to a company’s business purposes and strategic intent and carry the support of its shareholders. Such activities serve the interests of the company as a whole, not interests specific to individual managers or shareholders. Legitimacy is enhanced when corporate public policy activities occur within a clear policy framework that is overseen by the company’s Board and carries investor support.

Corporate involvement in public policy and the political process is a matter of corporate governance. When justified by a clear business case, it can be legitimate to corporate interests and of benefit to shareholders. As with good corporate governance, a company’s political involvement must have a strong ethical and cultural foundation, supported by adequate procedures and controls to avoid inappropriate activities.

Public policy advocacy is a legitimate activity, but only if companies seek to influence public policy, legislation and regulation in ways that are transparent, appropriately controlled, linked to the company’s strategy, clearly supportive of shareholders’ interests and conducted within an ethical policy framework.

Guidance

Policy Framework

Companies that take part in public policy advocacy should do so on the basis of a clearly articulated policy framework which should take into consideration the following:

• It should be grounded in a code of conduct that reflects the company’s broader approach to business ethics;
• It should clearly establish that any company public policy advocacy activity is conducted for the purpose of promoting the commercial interests of the company as a whole and is in the interests of its investors;
• Bearing in mind the overarching principle of responsibility, company public policy advocacy should be conducted within the constrains of legal and ethical norms and should not seek undue benefits for special interest groups at the expense of broader public welfare. The names of public policy advocacy firms retained should be publicly disclosed;
• It should commit the company to public disclosure of its public policy advocacy activities and any direct or indirect expenditure beyond a de minimis level.

 Procedures

• The company policy towards public policy advocacy should be communicated clearly by company management throughout the organisation, and should apply to company agents and external representatives when representing company interests;
• Training in company policies should be given on a regular basis for all company representatives who engage in corporate public policy advocacy activity;
• The company should establish robust internal controls and reporting processes as part of a risk management system to monitor compliance with its policies on public policy advocacy activity. Clear sanctions should be in place for individuals who are found to be in breach of these policies;
• Material breaches of company public policy advocacy activity should be brought to the immediate attention of the Board, and the Board should have defined policies for dealing with material breaches;
• The Board should also monitor the effectiveness of public policy advocacy in terms of how this investment of time and resources benefits the long term interests of the company.

Board Oversight

• It is the responsibility of the Board to understand and explicitly approve the company’s policies with regard to public policy advocacy. This includes membership fees or contributions to trade associations or related third-party organisations:
• The Board should appreciate the legal and reputational risks associated with improper public policy advocacy activity and be responsible for oversight of public policy advocacy activity. This could come under the purview of Board corporate governance or risk management committee, and includes monitoring and approving public policy advocacy and related contributions;
• In its monitoring the Board should ensure that public policy advocacy spending does not reflect narrow political preferences of the company’s executives that have little or no bearing on the company’s own commercial performance;
• Only company officers should engage external registered lobbyists or firms to assist the company in monitoring government policy development, advising the company , or communicating the company’s positions on various issues that concern the long term business interests of the company. The company should make all required public disclosures regarding lobbying activity;
• Policy Statements should be approved in advance by company officers and should support objectives that are beneficial to the long-term business interests of the company. In determining whether or not to approve a Policy Statement, company officers should examine many factors, including, but not limited to, the merits of any commitments, the cost to the company of making the commitments, the quality and effectiveness of the organisation to which the commitment will be made, and the extent to which it protects or enhances shareholder value or furthers the company’s long-term business objectives.

Transparency and Disclosure

• Company policies on public policy advocacy activity should be publicly disclosed and easily found in  a company’s website;
• Companies should disclose their public policy advocacy positions on key policy issues and these are reflected in written submissions to politicians, regulators, political parties or civil society groups; 
• Companies should identify key relationships with trade associations that engage in public policy advocacy on the company’s behalf;
• Companies should disclose their policies and processes for their contributions. Direct and indirect public policy advocacy spending beyond a de minimis amount should be publicly disclosed and reported annually in terms of amount and stated business purpose;
• Given the sometimes ‘revolving doors’ between business and politics, companies should be transparent about the issue of accepting employees, including Board directors, have or have had influential roles in politics.